Optus back on the ASX would be a good thing

Stuart Corner
Tuesday, 16 June 2009 03:42

Opinion and Analysis

SingTel has been reported as contemplating reducing its 100 percent stake in Optus to around 20-30 percent and relisting the company on the ASX. That could be a good thing for the Australian telecoms market.

At first pass it seems odd that SingTel, as has been reported, would want to sell down its 100 percent equity in Optus, a company that accounts for two thirds of its revenue and 50 percent of its EBITDA. However SingTel has investments in other markets, many of them with much higher growth rates than Australia and it has long been rumoured that SingTel 'bean counters' run Optus and keep a very tight hold on the purse strings.

As the number two player, Optus has spent the best part of two decades battling the power of the former monopoly. It got very badly burnt in the mid 90s when its move to bypass Telstra's stranglehold on the access network with the rollout of the HFC network was comprehensively defeated by Telstra replicating that network.

In more recent times it has yet to see any concrete outcomes from huge effort devoted to securing change in telecomms landscape. Optus earlier this month delivered a very comprehensive submission to the NBN regulatory reform paper to push for the structural separation of Telstra, yet it is not even clear whether this option is seriously canvassed by the paper and therefore, genuinely on the Government's reform agenda.

Before that there was the huge effort it put into the G9 in response to Telstra's offer to the government to rollout fibre to the node, there was its response to the NBN mark one and the embarrassment of having its $1b Opel regional wireless contract awarded by the Howard Government cancelled by the incoming Labor Government.

The board of SingTel may well be of the view that other regional markets in developing countries where a sophisticated and well established former PTT does not hold so much power and where the regulatory environment is much less uncertain represent more fertile ground for its investment dollars.

However the most important question for Australians is not why SingTel might want out but what the revival of Optus as an ASX listed public company with no controlling shareholder might mean for the local telecoms industry.

So long as the company was able to access the funds needed for growth, it would probably be a good thing: the focus of the board would no longer be subservient to that of a parent entity with fingers in many other telecoms pies but would be 100 percent on growing the company as a successful Australian telco, and the presence of another large telco player on the ASX would increase investor interest and market focus on the sector as a whole.

The reports suggest that SingTel would look to sell down its stake after two years and after vesting the Optus HFC network into the NBN. Hopefully by that time the NBN project would be sufficiently advanced and, more importantly, regulatory changes in train to give investors in a relisted Optus some degree of confidence in the market. Equally important, confidence will hopefully have returned to the financial community making access to capital rather easier.

Optus CEO, Paul O'Sullivan last week raised the possibility of Optus selling its HFC network to the NBN Co with the caveat: "as long as there is a clear, level playing field being created, and what we get is true open access and competition, and that no retail carrier can control the network."

Even if this wish is fulfilled. Telstra will remain the dominant retail service provider much larger, purely as a provider of retail services, than any other player in the market. A relisted Optus would open up opportunities for stiffer competition fuelled by share market dollars.